Market Orientation and Firm Performance in the Manufacturing Sector in Kenya

Lagat Charles, Chepkwony Joel, Kotut Cheruiyot Samwel

Abstract

The concept of market orientation has been a subject of research since it was introduced in the 1990s and it has been identified as an important theoretical construct. Previous studies have assessed the impact of market orientation, market positioning and innovation on firm performance. The objective of this study was on the process of market orientation and to empirically test the effect of the business environment on the relationship between market orientation and performance. The study used the resource based view approach and developed a framework for testing the theoretical relationships between the constructs. The study adopted a causal research design and it involved the use of a questionnaire-based survey of a random sample of 220 managers of Manufacturing Companies in Kenya. Descriptive statistics of the demographic characteristics of 147 respondents together with firm characteristics are presented. Exploratory factor analysis, scale reliabilities and confirmatory factor analysis are presented. Regression analysis was used to test the relationships between the constructs. The study confirms previous studies on the positive relationship between market orientation and performance (?1= 0.180, ?= 0.029). The business environment significantly (?2= 0.250, p = 0.003) affects firm performance in presence of market orientation. The findings of the study add new understanding to the literature on market orientation, business environment and firm performance in influencing the success of firms in a developing country context.